Signs of a slowdown in economic growth momentum seems to be guiding India Inc towards an austere path, with the country’s largest private sector lender ICICI Bank deciding to skip rituals like annual promotions and large bonus payouts to employees this year.
“We are reading the economy and the mood is obviously not as bullish as a year or two ago. So, we have decided to be cost-prudent by holding back the annual promotions and scaling down the bonuses for this year,” ICICI Bank’s group head of human resources K Ram Kumar said from Mumbai.
The bank announces these annual promotions and bonuses mostly by the end of April every year and has been known for its liberal approach when it comes to doling out promotions, salary hikes and bonuses for employees.
There would be bonus payouts this year, but not as large as usual, while promotions and large-scale salary hikes are out of the question. Even bonuses are being scaled down, Ram Kumar said, adding that the bank is giving a signal to its employees that those proving to be cost-prudent in the next 12 months would be rewarded accordingly.
However, the decisions have nothing to do with the subprime crisis, Ram Kumar asserted. “There is no subprime in India and there is no subprime in ICICI Bank. It is just a proactive alignment with the economy,” he noted.
The International Monetary Fund has forecast India’s economy to expand by a slower 7.9 per cent in 2008, compared to over nine per cent growth rate in the last four years.
“Besides, we have already promoted people ahead of time and, in anticipation of growth, recruited and moved the employees up the ranks,” Ram Kumar said, adding that a lot of development exercise has been taken across the workforce.
Asked if similar measures would be taken for other businesses such as insurance, asset management and brokerage, Ram Kumar said: “This approach of cost prudence will be the strategy for entire ICICI group.”
However, if the economy bounces back to its upward growth momentum and returns to an era of 9-10 per cent growth, the bank would again go bullish on its human resource strategies and the employees would be rewarded accordingly, as such development in economic scenario would only create better business growth opportunities for the company.
“Not long ago, we were talking about GDP growth rate of 9-10 per cent, but now some expect it to be just around seven per cent,” Ram Kumar said, adding that it would be foolish if a company does not adopt to the prevailing economic situation for managing its various expenses, including those spent on human resources.
The growth rate has averaged just below nine per cent in past five fiscals, but some economists now expect a growth rate of just about seven per cent in the current fiscal ending next March, partly due to the slowdown in global economy.
“When we gave promotions and wage hikes, there is no point in pulling it back. Rather, we have decided to hold back fresh hikes and promotions, as per the current mood of economy. We would certainly go bullish again whenever economy growth regains its upward momentum.”
Moreover, currently there are no gaps present in the leadership structure of the company and no promotion is really required at this point of time, he said.
In the past, the bank has twice decided to do away with annual promotions — in 1998 when it forayed into retail banking and in 2002 when ICICI was merged with ICICI Bank.
“When we say we are not promoting people, we are not scaling down actually. When there is no economic growth, why one should promote people? We are just trying to be cost- prudent,” he added.
The issue in India is about supply side concerns and we are continuing our investments towards increasing the supply of right talent, he said, adding that ICICI Bank’s target is to pay Rs 2 towards creating supply for every Rs 10 spent on wages.
The bank is, however, not cutting down on its hiring activities. It has recently recruited about 2,500 people through campus placements and they would joint in June, he said.
“For the past few years, we have been recruiting 15,000-16,000 every year and we would continue the hiring activities. Whenever there is need, such as expansion, new branch openings, we would recruit. We do not plan for it in advance,” he said.
Ram Kumar also dispelled the fears about any large scale layoffs at the bank. “Each year, some 3-5 per cent people are asked to look for other opportunities after we do not find their performance at par. This year also, it would be the same.”
